Community Improvement Districts County Counselors Association of Kansas Annual Meeting November 15, 2010 Janet S. Garms janet.garms@kutakrock.com 816-502-4607 Dorothea K. Riley dotty.riley@kutakrock.com 816-502-4665

Community Improvement Districts Overview K.S.A. 12-6a26 et seq. (“CID Act”) Effective July 1, 2009 Allows cities and counties to levy special assessments or sales tax Use of assessments and sales tax to finance projects or pay debt service on special or general obligation bonds

Community Improvement Districts Formation of Districts Create either a special assessment district or sales tax district Special Assessment Districts Petition signed by owners of all land within the proposed district Only financing mechanism is special assessments No general obligation bonds will be issued Governing body may adopt a resolution or ordinance creating district Sales Tax Districts Petition signed by owners of more than 55% of the land area and the assessed value of land within the proposed May utilize sales tax, general obligation bonds and special assessments Requires a public hearing before resolution or ordinance creating district Petition Requirements Includes nature and cost of project, method of financing, map and legal description

Community Improvement Districts Eligible Projects CID Act contains an extensive list of projects that may be financed Acquisition, improvement, construction or demolition of the following: Public and private buildings, structures and facilities Sidewalks, streets, drainage systems, sewer systems, parking lots and garages Lighting, awnings, landscaping, utilities and other site improvements Paintings, sculptures and other cultural amenities Mass transit and waterways Payment of certain operating and other expenses including: Music, security, cleaning, child-care, maintenance and employee training Promotion of tourism, cultural activities and special events Promotion of business activity and economic development Economic impact and development studies Various soft costs, including development and creation costs Up to 5% of total cost to municipality for administration/supervision

Community Improvement Districts Financing of Project Costs Projects can be financed on either a pay-as-you go method or by the issuance of bonds, or a combination of both If special assessments levied, follow assessment statute except: No assessments levied against city or county Assessment can be reduced or eliminated to extent sales taxes sufficient to cover DS Sales tax may not exceed 2% in increments of .1% or .25% If bonds issued, sales tax shall expire no later than date bonds mature If pay-as-you-go financing is used, sales tax shall expire 22 years from date tax starts to be collected or when all project costs paid

Community Improvement Districts Special and General Obligation Bonds Must mature in no more than 22 years Special obligation bonds do not count against statutory debt limitations General obligation bonds count against statutory debt limitations if all general obligation bonds issued pursuant to CID Act exceed 3% of assessed valuation Bonds are not required to be sold at public sale If a protest petition is signed and filed by 5% of qualified voters within 60 days following public hearing for sales tax district, general obligation bonds cannot be issued unless approved by majority of voters at election Suits to set aside assessments or sales tax or questioning the validity of proceedings creating the district or authorizing project must be brought within 30 days of publication of resolution or ordinance creating district or imposing the tax Federal and state tax implications

Community Improvement Districts Policy Considerations Many governing bodies have passed resolutions approving CID policies Limiting eligible projects Public vs. private Capital vs. operating Prior expenditures Excluding specific types of projects Target areas or types of projects for development Requiring funding/development agreements Consider the administrative responsibilities of County Provide for a source of payment of County’s outside consultants Address performance standards, assignments, bankruptcy, etc.

Community Improvement Districts Policy Considerations Requiring evidence of project viability Minimum equity requirements for developer Background checks History of timely tax payments Evidence of experience/stability Requiring additional notices Notice to all existing tenants Notice to consumers Requiring bond issuance and pay-as-you go standards Require or express preference for pay-as-you-go Minimum threshold for bond issue size or pay-as-you-go project size Determine availability of GO backing Require minimum credit standards prior to issuance of bonds Limit sale of non-GO backed bonds to qualified investors/large denominations ($100,000 or more) 8

Community Improvement Districts Legal Questions 5% limit on municipal administrative costs 22 year sales tax collection limit 3% debt limit Land ownership for petition State administrative fee “Value of land area” Percent required for petitions Adding or removing property Estimated cost of project Impact of future legislation Combining with other financing tools

Community Improvement Districts Dorothea K. Riley dotty.riley@kutakrock.com 816-502-4665 Janet S. Garms janet.garms@kutakrock.com 816-502-4607